Week Of Worries Lies Ahead

Monday, September 05, 2005

The aftermath of hurricane Katrina, multiple warnings from the IMF and the IEA about the dangers of soaring oil prices to global growth and the weak dollar leave enough room for a week of worries ahead. Add in Venezuela's repeated threats to look for other than American buyers for its oil and the fact that OPEC member Indonesia has recently become an oil importer and tell me if your equation comes to another result than oil heading further north. But don't forget to add in the fact that "evil axis" member Iran has announced to increase its production quota by 500,000 to 1 million barrels at the next OPEC meeting on September 19.
While estimates for the damages caused by Katrina are reaching the $100 billion mark and compare to a paltry $10.5 billion aid pledged by the White House, a look at GDP figures from Thailand released today shows that natural desasters like last year's tsunami slow GDP growth initially. The Thai economy shrank in the quarter following the tsunami 0,7 percent but recorded 1.9 percent growth quarter-on-quarter in the second quarter of 2005. The comparison is favorable for Thailand as the tsunami did not destroy countless oil and gas installations and refineries as is the case with Katrina.
While the offer of several European countries to send refined oil products to the US has brought softer oil prices Monday morning it remains to be seen whether supply disruptions can be cushioned effectively anymore or whether they will just delay the next price spike as Europe will have to fill up its emergency reserves again.
IEA head Claude Mandill said on the weekend, "if the crisis affects oil products then it's a worldwide crisis. No one should think this will be limited to the United States. They are already buying gasoline in Europe. If the refineries are damaged, that will only increase. Then this will become a worldwide crisis very quickly."
While oil marketes ars still trying to figure the new price ranges in the aftermath if Katrina, profits on the long side can be made. Just look at gold which ran up to $446.50 an ounce in Asian trading and hovered around $445 in early European trading. The precious metal proves one more time its safe haven status and I take bets that safe haven seeking will increase over the next six months significantly.

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